Where the City’s movers and shakers have their say. Today, it’s David Smith, head of dispute resolution at JMW Solicitors
Renters’ rights back on agenda, but with risky changes
The Labour government will have the second reading of its Renters’ Rights Bill tomorrow. This is largely a repeat of the previous government’s bill to reform private renting but with some notable alterations.
Crucially, the new administration has not made any changes to the removal of fixed terms and simple eviction of tenants.
However, there are two key changes around rents which are likely to have significant effects on the market.
First up is a ban on rent bidding, which is similar to the one that exists in the Australian state of Victoria. This will require all landlords to market properties at a set rental price. They will then not be allowed to encourage bidding and cannot accept any offer to pay a rent that is higher than the originally advertised price.
In practical terms, it is likely that properties will be advertised at a rent which is at the high end of what it is anticipated people will pay and then tenants will bid up to that sum. This would mean that headline advertised rents will increase, driving inflation and increasing rents market wide.
Secondly, there are in-tenancy rent increases. The new system will require that rent increases can only be carried out using a statutory notice with two months’ warning. The tenant can then contest the notice before the first-tier tribunal (FTT) which is free. The FTT will review the rent and may reduce it but cannot increase it further. The new rent will not commence until the next rent due date after the tribunal determination. As the FTT takes a few months to deal with these matters it is likely that most tenants will contest rent increase notices as, at worst, this will delay the date on which the higher rent kicks in.
These two changes are likely to be the most economically significant and have the potential to totally alter and destabilise the rental market.
Rayner strikes right tone on landlords
While attending the Labour Party Conference it was heartening to hear deputy prime minister Angela Rayner say that she wants to “work in partnership” with the private rental sector (PRS) and social landlords to deliver decent and safe homes. Ms Rayner also correctly outlined the importance of supporting landlords as well as tenants. This is crucial, because if landlords are sufficiently spooked by legislative reform that they sell up, tenants will suffer as rental costs would increase further either due to less demand or by new landlords seeking a higher yield.
The energy efficiency challenge
There has long been a drive to improve energy efficiency in private rented sector (PRS) properties. The PRS generally sits behind the social sector in terms of energy efficiency and there is a desire to improve energy efficiency in homes, as it has the potential to provide substantial benefits in carbon reduction and in savings to some of the poorest families.
The previous government had started by suggesting that it would require landlords to reach an EPC grade C by 2028 before reversing itself and abandoning the commitment altogether. The new Labour government had been clear that it would reverse this and has now formalised matters by saying that it will consult on requiring landlords to reach an EPC grade C by 2030.
This is a laudable goal but the net cost to the sector will be high, and these additional costs will be borne by tenants in higher rents. At a time when rents are already high, a future pay-off for tenants in lower energy bills is unlikely to be entirely welcome if they are required to pay more for their accommodation in the short term.
Not so simple after all
Anthony Seldon’s book, Truss at 10, contains interesting takeaways about the structure of leadership. Seldon had previously written a Spectator article with a 10-point plan on how to be a great Prime Minister.
Allegedly, this was read by Truss’s advisers, and we are told they sought to structure her premiership around it. Seldon in turn structures his book around the same points and shows why Truss failed to meet them.
Leading a country based on a 10-point plan is much too simplistic an approach. It is also too simplistic an approach for the property sector.
Our current and previous government appear to think they can fix housing problems with simplistic alterations to the PRS. They cannot.
“Any rental market reform must consider the plight of both tenant and landlord in equal measure if the issue of supply is to be properly addressed.”
Guy Gittins, CEO of Foxtons